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KJL LAW, Lawyer
Category: Legal
Satisfied Customers: 1373
Experience:  Attorney at law Office of KJLLAW
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The Trustee states that the Debtor's 401 (k) retiremen t

Customer Question

The Trustee states that the Debtor's 401 (k) retiremen t account is no longer an exempt asset because the Debtor engaged in a prohibited transaction. Specifically , the Debtor took title, as trustee of 401 (k) Profit Sharing Plan, to improved real property. Thereafter, the Debtor caused the retirement plan, the beneficial owner of the proper ty, to enter into a transaction involving the property with an friend who was, at all relevant times, the owner of 50% of the membership interests of several limited liability companies of which the Debtor was also 50% owner of same limited liability companies. Was this a prohibited transaction and did it disqualify the Debtor's 401 (k) retirement account thereby losing exemption rights.
Submitted: 11 months ago.
Category: Legal
Expert:  KJL LAW replied 11 months ago.
transferring the money out of the 401(k) or any retirement account for s real estate transaction, without the Trustees approval, turns the funds from a protected to an unprotected asset.Basically, the funds went from a retirement account status to money being used for an asset not approved by the Trustee or court. The Debtor had Title and converted, used, the money for use with the property, which then makes the money non exempt.
Customer: replied 11 months ago.
The trustee purchased the house for the plan investment (property is deeded to the plan)